Everyone buys Insurance. The question is are we buying only what we need or are we buying what the salesperson says we need? We need to consider four things before we buy insurance. Do we need it? What are we buying? How much does it cost? What do we have to do to file a claim if it is necessary?

1. Do we need it?

Insurance is bought in many ways and for a variety of reasons. When you buy a major or minor appliance, you are asked if you want to buy the extended policy. That is insurance.

Ask yourself:

• How long will the policy last?
• What is covered, and what is not covered?
• What kind of manufacturing warranty comes with it? In a lot of cases, the warranty is covered by the manufacturer and the seller only handles it for you.

You will be able to figure out if it is cost effective by asking questions. The same is true with other types of insurance. Asking questions will save you money, by allowing you to purchase only what you need.

2. What are we buying?

In many cases, there a lot of extras built into policies that increase the price. It is best to know what you are buying before you make a decision. Knowing what you bought will save you time and money if you have a claim.

My son bought full coverage on his diesel truck. When he bought fuel one day, the station he bought it from had water in their tanks. The water ruined his engine and cost $12,000 to replace. If he didn’t ask his insurance agent about his policy he would have been out $12,000 dollars. He found out he was covered and he only had to pay the deductible of $1,000.

Make sure you know what you are buying and when in doubt, check it out. It doesn’t hurt to check with your agent or dealer if you are covered when things go wrong.

3. How much does it cost?

When you buy a policy or extended warranty, they will tell you what it will cost you. This is the face value, however that can be modified if you ask a very simple question.

• If I assume part of the risk, will it lower my cost? Simply put, the risk you assume is your deductible.

The more you increase your deductible the lower the cost. You have to decide how much you can afford to pay in case you have a claim.

4. What do I have to do to file a claim?

In the case of extended warranties, you may have to send your product off to have it repaired or replaced. The person or store you bought it from will either send it off for you or give you a replacement. Ask before you buy.

• Is the warranty worth it if you can’t use your device for four to eight weeks or more?
• Would I get the same thing, if I used the manufacturer warranty?
• Is the store warranty any better than the manufacturer warrant?

These types of questions will save you frustration and money if you check them out first. Knowledge is power. The more you know about the warranties you are buying, the better off you will be.